K'jipuktuk (Halifax) -- For many years now the Nova Scotia chapter of the Canadian Centre for Policy Alternatives has released its annual alternative budget for Nova Scotia. The alternative budget, a collaboration of many contributors, suggests where the government should spend its money in the upcoming year, and how it should pay for it.

The alternative budget typically stands in sharp contrast to its official counterpart, and this year is no exception. Whereas last week's provincial budget focuses on balancing the budget and is all about austerity, the alternative budget is not balanced. Whereas the official budget cuts spending in many departments, the alternative budget increases social assistance payments by 50 percent, and also increases spending on items such as healthcare, affordable housing, childcare and post-secondary education.

The Halifax Media Co-op met with James Sawler, an economist at Mount Saint Vincent University and one of the authors of the financial framework for the alternative budget. We talked about taxes, priorities, and the notion that government must live within its means.

”The long and short of it is that Nova Scotia's economy is not in a crisis of any kind and we do not need to balance the budget immediately, which is not the same as saying we shouldn't be fiscally responsible,” says Sawler. “Rather than the annual deficit, a better measure of our fiscal position is the debt to GDP ratio.”

The GDP, or Gross Domestic Product, is the value of goods and services produced by all sectors in the economy. It captures the state of the economy in one number. If the GDP is up then the economy is growing, if it is down then the economy is contracting.

“If we compare debt to GDP ratios to other jurisdictions internationally then Canada is in a very good position and in Nova Scotia the situation is very positive,” says Sawler. Sawler believes that this, combined with relative low interest rates charged on government debts, will ensure that the debt to GDP ratio will continue to shrink for the foreseeable future.

Sawler believes it is important to move away from austerity budgets for two reasons. First of all, he points to the weak economy. “The economy has been stagnating, internationally, nationally and in Nova Scotia as well. Unemployment is up, the economy is growing very slowly and what the economy needs is a bit of a boost, rather than austerity,” Sawler explains. “If you cut back on government spending then that has a negative impact on jobs, directly and indirectly.”

But stimulating a sagging economy is not the only reason for the increased spending the alternative budget calls for. For Sawler it is also very much a matter of doing the right thing.

“We talk about deficits, well, we have a poverty deficit, especially when it comes to children living in poverty” says Sawler. “It is short term thinking not to address those issues. The same for spending cuts in education. The government suggests that the number of students is declining, but Nova Scotia's spending per student again, if not the lowest it is second- or third-lowest in the country, by a good margin. So it should be seen as an opportunity, now that we have fewer students, to really invest in our future. The cost of austerity is the failure to do that.”

Austerity proponents often claim that Nova Scotia is a big spender. Sawler argues that this is simply not true. “The latest data I could get my hands on was 2009, and in that year Nova Scotia had the third lowest spending per capita in the country, And if you look back over twenty years, never was Nova Scotia higher than third lowest among the provinces. And for many years Nova Scotia was the lowest”, says Sawler.

Where does the money for the alternative budget's increased spending come from?

Sawler explains that overall the alternative budget reflects a more progressive tax system. A progressive tax is one where you pay more taxes when you make more money. A regressive tax is a tax that doesn't take income into account. In the alternative budget rich people will pay more taxes, and regular people get a couple of breaks.

Sawler highlights the proposal in the alternative budget to tax 100 percent of capital gains. At this time only 50 percent of capital gains, the profits from stock market investments, are taxed.

As well, the alternative budget scratches the Your Energy Rebate Program, a rebate for each Nova Scotia household, no matter how wealthy, to help with high energy costs. Better to assist the less wealthy directly, Sawler argues.

Which brings us to the subject of taxes. Shouldn't governments cut spending just to provide some much-needed relief for taxpayers?

Sawler agrees that relatively speaking we do pay higher taxes in Nova Scotia, although not necessarily the highest in the country. But there is a good reason for that, Sawler claims. Nova Scotia is a poor province, and given that federal equalization funding is insufficient, we are going to need a higher progressive taxation system.

“People are more likely to leave Nova Scotia if their children are receiving a lower quality of education, if they don't feel they have access to quality health care, and that if they graduate they cannot get a job”, says Sawler. “It isn't because of high taxes that people leave the province.”